How to Trade the Forex Markets
So more and more commentators are calling for a split of some sort in the Eurozone but their cries will almost certainly fall on deaf ears. At least for now. The long term prospect for the Eurozone currency must remain doubtful given that the markets do not like uncertainty. For now though, the Euro is more than holding its own against the Dollar. The US currency continues to give up ground to the single currency.
The recent downgrading of Portugal seems to have been the trigger for further buying of the Euro. It is almost a case of we-know-the-worst-and-we-can-now-move-on.
According to Simon Denham of FinancialSpreads.com, "It looks like we are still in a possible bull-bounce in a bear-market but the probabilities of that are moving further and further away from the US currency. Having said that, the US economy seems to be recovering faster than the European economy. If so, we could speculate on interest rates moving higher in America before they move higher in Europe. Naturally any such move should support the Dollar".
Viewing the markets in a little more detail the Euro is at pretty much the highs for the last two months. Critically it is above the bear-trend-line that has been in place since December 2009. This means that we could see the technical markets players come out so that they can set up long positions for a market move back to 2009 levels.
Looking at Sterling, the key UK unemployment data has been in a range that the markets felt comfortable with. All this has meant though is the Pound returning to the median $1.5250 level of the entire 2009/2010 Dollar/Sterling trading ranges.
Over the last eighteen months the Dollar/Sterling pair has oscillated, albeit in huge moves, around this mark. It is difficult to estimate which way the pair will go next but the trend is with the bulls and, as is often the case with the forex markets, it is dangerous to stand in the way of the trend.
If you want to speculate on the forex markets then there are a number of trading options; Traditional Foreign Exchange, Margined Forex, CFDs and Financial Spread betting. In the UK, and increasingly across Europe and Australia, investors are turning to the latter option. Financial Spread betting offers a convenient trading option for both experienced traders and smaller investors.
Note though that every form of speculative investment can result in a loss and with spread betting, these losses can be greater than your initial stake size. There are some other areas that the following warning says you should consider, "Please ensure that spread betting matches your investment requirements. Spread betting carries a high level of risk. Where necessary, seek independent advice. Familiarise yourself with the risks".
Given the broad variety of markets available, financial spread betting is an investment instrument worth thinking about. Generally, spread betting companies offer access to thousands of global markets which range from Forex, Indices, Stocks and Shares to Commodities such as Crude Oil, Gold and Coffee.
Also, investors can go either long or short of the markets. As a result, you can speculate on a particular market in the way in which you feel it is going to move. You are not limited to spread betting on a product to rise, you can speculate on a market to fall.
Apart from the types of trades there are also some cost benefits, unlike normal forex trading with firms like Financial Spreads and IG Index you do not pay any commissions or broker's fees.
Finally do not forget that financial spread betting is tax free (based on UK tax law, if you pay tax in a jurisdiction other than the UK then this may be different). It is classed as tax free because you do not actually buy or sell any physical resources, shares or assets, you are simply speculating on the future value of your chosen market.
About the Author:
A leading financial author based in the heart of London's Financial District. Thomas Bainbridge is a respected commentator on the spread betting markets.